773, L.L.C. v. Scottsdale Ins. Co.

• Decision Date: 29 February 2012
• Docket Number: CIVIL ACTION No. 11-2103-KHV
• Parties: 773, L.L.C., Plaintiff, v. SCOTTSDALE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of Kansas

773, L.L.C., Plaintiff,

v.SCOTTSDALE INSURANCE COMPANY, Defendant.

CIVIL ACTION No. 11-2103-KHV

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS

Dated: February 29, 2012

MEMORANDUM AND ORDER

This matter comes before the Court on Plaintiff's Motion For Summary Judgment On The Issue of Coverage (Doc. #28) and Defendant Scottsdale Insurance Company's Motion For Summary Judgment (Doc. #30), both filed October 28, 2011. For reasons stated below, the Court overrules both motions.

Summary Judgment Standards

Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show no genuine issue as to any material fact and that the moving parties are entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Vitkus v. Beatrice Co., 11 F.3d 1535, 1538-39 (10th Cir. 1993). A factual dispute is "material" only if it "might affect the outcome of the suit under the governing law." Liberty Lobby, 477 U.S. at 248. A "genuine" factual dispute requires more than a mere scintilla of evidence. Id. at 252.

The moving party bears the initial burden of showing the absence of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Hicks v. City of Watonga, 942 F.2d 737, 743 (10th Cir. 1991). Once the moving party meets its burden, the burden shifts to thenonmoving party to demonstrate that genuine issues remain for trial as to those dispositive matters for which she carries the burden of proof. Applied Genetics Int'l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241 (10th Cir. 1990); see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986); Bacchus Indus., Inc. v. Arvin Indus., Inc., 939 F.2d 887, 891 (10th Cir. 1991). The nonmoving party may not rest on its pleadings but must set forth specific facts. Applied Genetics, 912 F.2d at 1241.

The Court views the record in the light most favorable to the nonmoving party. Deepwater Invs., Ltd. v. Jackson Hole Ski Corp., 938 F.2d 1105, 1110 (10th Cir. 1991). It may grant summary judgment if the nonmoving party's evidence is merely colorable or is not significantly probative. Liberty Lobby, 477 U.S. at 250-51. In response to a motion for summary judgment, a party cannot rely on ignorance of facts, on speculation, or on suspicion, and may not escape summary judgment in the mere hope that something will turn up at trial. Conaway v. Smith, 853 F.2d 789, 794 (10th Cir. 1988). Essentially, the inquiry is "whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so one-sided that one party must prevail as a matter of law." Liberty Lobby, 477 U.S. at 251-52.

Factual Background

The following facts are uncontroverted or deemed admitted.

Plaintiff owns a multi-tenant commercial building at 733 Commercial Street, Atchison, Kansas. Effective January 30, 2010 through January 30, 2011, defendant issued a business property insurance policy to plaintiff for the property at 733 Commercial. The Policy includes an additional coverage provision as to collapse of the building as follows:

D. Additional Coverage - Collapse

The coverage provided under this Additional Coverage - Collapse applies only to an abrupt collapse as described and limited in D.1. through D.7.

1. For the purpose of this Additional Coverage - Collapse, abrupt collapse means an abrupt falling down or caving in of a building or any part of a building with the result that the building or part of the building cannot be occupied for its intended purpose.

2. We will pay for direct physical loss or damage to Covered Property, caused by abrupt collapse of a building or any part of a building that is insured under this Coverage Form, if such collapse is caused by one or more of the following:

a. Building decay that is hidden from view, unless the presence of such decay is known to an insured prior to collapse;

b. Insect or vermin damage that is hidden from view, unless the presence of such damage is known to an insured prior to collapse;

c. Use of defective materials or methods in construction, remodeling or renovation if the abrupt collapse occurs during the course of the construction, remodeling or renovation.

d. Use of defective material or methods in construction, remodeling or renovation if the abrupt collapse occurs after the construction, remodeling or renovation is complete, but only if the collapse is caused in part by:

(1) A cause of loss listed in 2.a. or 2.b.;

(2) One or more of the "specified causes of loss";

(3) Breakage of building glass;

(4) Weight of people or personal property; or

(5) Weight of rain that collects on a roof.

3. This Additional Coverage - Collapse does not apply to:

a. A building or any part of a building that is in danger of falling down or caving in;

b. A part of a building that is standing, even if it has separated from another part of the building; or

c. A building that is standing or any part of a building that is standing, even if it shows evidence of cracking, bulging, sagging, bending, leaning, settling,shrinkage or expansion.

Policy at 6-7, Commercial General Liability Coverage Form, Exhibit A to Defendant's Memorandum (Doc. #31).

In mid-July of 2010, tenants at 733 Commercial complained that a door was not closing properly. In mid to late July, Jeff Caudle, plaintiff's representative, visited the property to inspect the door. Caudle noticed a vertical crack in a masonry joint to the left of the front door on the property. On July 27, 2010, Rick Fay of the Building Department of Atchison, Kansas sent plaintiff a letter which stated in part as follows:

[On] Monday, July 26, 2010 I surveyed the building at [733 Commercial]. Visible exterior damage due to a number of structural failures was evident. The sidewalk and a portion of the street were barricaded to reduce the public's exposure to sudden dramatic failure and collapse. * * *

The structure is to remain unoccupied and barricades that you provide remain in place until a Plan of Correction provided by a Kansas licensed engineer with structural expertise is provided to the Code of Enforcement Office.

Exhibit C to Defendant's Memorandum (Doc. #31).

Plaintiff retained Mark Schulte, a professional engineer, to examine the structural condition of the southwest corner of the building. On July 29, 2010, Schulte inspected the building. On July 30, 2010, Schulte sent a letter to Caudle which stated that the southwest "corner first floor brick column" was failing, that the "outer wythe of brick that was replaced at some point in time in the past was not of full brick thickness under the load bearing column," and that as a result of insufficient support, "load was transferred to the exterior wythe of the 9 foot wide wall west of the column resulting in extreme rotational displacement of the wall." Schulte noted "brick distortion" along the top of one of the walls and that the southwest "ends of the first floor (basement ceiling) floor joists [we]re appreciably deteriorated from moisture." Schulte advised Caudle that a portionof the southwestern exterior wall of the building needed to be removed and "reconstructed from street level." Based on Shulte's recommendations, plaintiff planned to begin repairs and reconstruction on August 10, 2010.

On August 7, 2010, the southwest exterior facade of the building suffered a partial collapse. The top part of the building's wall fell to the sidewalk below it. Plaintiff seeks coverage for damages caused by the collapse. In a notice of loss form, plaintiff's insurance agent, Maximum Insurance, LLC, advised defendant that plaintiff thought that water entering from behind the wall of the building caused the collapse.

Defendant retained Rodney Sommer, a structural engineer, to determine the cause of the collapse. Sommer opined as follows:

It is my opinion the collapse of the masonry walls at the northwest entry to 733 Commercial was caused by ongoing deterioration of the masonry components due to water infiltration, numerous freeze/thaw cycles, and possible erosion of the deteriorated mortar joints. This failure may have also been aggravated by the lack of proper connection between the second floor structure and the masonry walls. The water infiltration was probably due to deteriorated and unmaintained roofing and coping on the parapet walls.

Letter From Sommer to Eagle Adjusting Dated September 10, 2010 at 5, attached as Exhibit G to Defendant's Memorandum (Doc. #31). Defendant also asked Sommer if the building decay was hidden from view and if the weight of ice or snow contributed to the collapse. Sommer responded as follows:

I do not have knowledge of what was visible prior to the collapse of the north/northwest portions of the upper level wall. However, it is obvious from viewing the interior of the adjacent remaining portions of the upper level walls that water entry had been a long term problem. It is probable that water entered the brick wall through the parapets and deteriorated roofing for a long period of time. This water entry would have contributed to freeze-thaw deterioration of the masonry over time. Ice and snow loading on the roof would tend to compress the brick and mortar and this type of action over several cycles, along with possible lateralmovement of the wall due to potential lack of sufficient original floor joist ties, probably resulted in the collapse of the brick pedestal between the upper level windows.

Ice and snow loading on the roof should not have caused the wall to collapse if the masonry was in a non-deteriorated condition.

Letter From Sommer To Eagle Adjusting Dated October 8, 2010 at 1, attached as Exhibit H to Plaintiff's Memorandum (Doc. #29).

Schulte testified that before the collapse, he concluded that a failing column and transferred weight to the exterior of the wall caused the collapse. His report did not mention the floor joists on the second...